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SR 12-18-2018 3L City Council Report City Council Meeting: December 18, 2018 Agenda Item: 3.L 1 of 3 To: Mayor and City Council From: Andy Agle, Director, Housing and Economic Development Subject: Annual Report on Low- and Moderate-Income Housing Asset Fund Recommended Action Staff recommends that the City Council: 1. Receive the Annual Report on the Low- and Moderate-Income Housing Asset Fund for Fiscal Year 2017-18 and authorize staff to post the report on the City's website by December 31, 2018; and 2. Direct staff to present the independent audit of the Low- and Moderate-Income Housing Asset Fund to the Council upon completion of the independent audit of the City’s Comprehensive Annual Financial Report (CAFR) and authorize staff to post the results of the audit on the City's website after presentation to Council. Summary The City provides financial assistance to support the acquisition, rehabilitation, and new construction of housing affordable to lower income households. City funding to support the investments comes from a variety of sources (including voter-approved Measure GSH funds, loan repayments, and development impact fees) and is accounted for in various funds. The Low- and Moderate-Income Housing Asset Fund specifically accounts for the housing assets of the former Redevelopment Agency. With the passage of Measure GSH and the Council’s direction of loan repayments from the former Santa Monica Redevelopment Agency to affordable housing, the City’s is allocating more than $15 million per year toward affordable housing. As detailed below, the Low- and Moderate-Income Housing Asset Fund represents a portion of the total funds available for affordable housing. State law requires the City to report annually on the Low- and Moderate-Income Housing Asset Fund (Fund) of the former Santa Monica Redevelopment Agency (RDA). For Fiscal Year 2017-18, the Fund included approximately $9.2 million to fund the production and preservation of affordable housing within the next three years. In 2 of 3 addition, the former Agency’s inclusionary and replacement housing obligations have been satisfied. The law also requires an independent audit of the Fund, which will be completed as part of the City’s annual audit process. Discussion The City as Housing Successor assumed the housing functions of the former RDA on January 10, 2012. The transfer of the functions included the transfer of formerly designated RDA low- and moderate-income housing assets together with any funds generated by former RDA housing assets. The funds must be maintained by the City in the separate Fund and expended in accordance with Health and Safety Code section 34176.1 ("Section 34176.1"). Allowable expenditures include the development of affordable housing, monitoring and preservation of housing subject to affordability restrictions and covenants, and homeless prevention and rapid rehousing services for homeless individuals. Senate Bill 341 (SB 341), which is codified in Health and Safety Code Section 34176.1 and became effective on January 1, 2014, requires each housing successor that assumed the housing functions of a former redevelopment agency to post a report on its website that contains information regarding the Fund of the former redevelopment agency for the previous fiscal year. In this case, the City, as the Housing Successor, is required to prepare and post the report (Attachment A), after Council's review and receipt. The Report includes the following information:  the Fund’s balance for the fiscal year ending June 30, 2018 is $9,172,829, with $2,439,601 of deposits from City-Agency loan repayments, interest income, and residual receipts, and $699 in expenditures for bank fees during the period; $2,527,363 has been encumbered by loan commitments to non-profit affordable housing organizations for the production and preservation of affordable housing;  the former RDA’s replacement housing obligations are satisfied;  the former RDA’s inclusionary housing obligation was satisfied as of June 30, 2009; 3 of 3  approximately 9.8 percent of the affordable housing assisted by the former RDA and the Housing Successor is restricted to seniors; and  a plan to encumber “excess surplus” funds within the next three fiscal years. To ensure that the monies in the Fund are expended in accordance with the law, Section 34176.1(f) requires an independent financial audit of the Fund within six months of the end of the fiscal year. The independent audit of the City’s Fund will be included as part of the City’s Comprehensive Annual Financial Report (CAFR) prepared by Lance, Soll and Lunghard (LSL), the City’s independent auditor. Staff is working to complete the CAFR during the required six-month timeframe. Staff will post the results of the independent audit of the Fund on its website after the CAFR is presented to Council. Financial Impacts and Budget Actions There is no immediate financial impact or budget action necessary as a result of the recommended action. Prepared By: Melissa Lindley, Principal Administrative Analyst Approved Forwarded to Council Attachments: A. Low and Moderate Income Housing Asset Fund Annual Report Santa Monica Housing Successor Page | 1   Attachment A ANNUAL REPORT REGARDING THE LOW AND MODERATE INCOME HOUSING ASSET FUND FOR FISCAL YEAR 2017-2018 PURSUANT TO CALIFORNIA HEALTH AND SAFETY CODE SECTION 34176.1(f) FOR THE SANTA MONICA HOUSING SUCCESSOR This Housing Successor Annual Report (Report) regarding the Low and Moderate Income Housing Asset Fund (LMIHAF) has been prepared pursuant to California Health and Safety Code Section 34176.1(f). This Report sets forth certain details of the Santa Monica Housing Successor (Housing Successor) activities during fiscal year 2017-2018 (fiscal year). The purpose of this Report is to provide the governing body of the Housing Successor an annual report on the housing assets and activities of the Housing Successor under Part 1.85, Division 24 of the California Health and Safety Code, in particular sections 34176 and 34176.1 (Dissolution Law). This Report conforms with and is organized into sections I. through XI. inclusive, pursuant to Section 34176.1(f) of the Dissolution Law: I. Amount the City received from City-Agency loans: This section provides the total amount of funds received from repayment of City-Agency loans during the fiscal year pursuant to Section 34191.4(b)(3)(A). The City received $9,960,405 pursuant to 34191.4(b)(3)(A) from the repayment of City- Agency loans during the Fiscal Year 2017-18. II. Amounts Deposited into LMIHAF: This section provides the total amount of funds deposited into the LMIHAF during the fiscal year, distinguishing between amounts deposited pursuant to 34191.4(b)(3)(B) and 34191.4(b)(3)(C), amounts deposited for other items listed on the Recognized Obligation Payment Schedule (ROPS), and other amounts deposited. A total of $1,992,081 was deposited into the LMIHAF pursuant to 34191.4(b)(3)(B) and 34191.4(b)(3)(C) during the fiscal year 2017-18. Of the total funds deposited into the LMIHAF, a total of $0.00 was held for items listed on the ROPS. Other amounts deposited into the LMIHAF during fiscal year 2017-18 were $447,520 from residual receipts, return of excess loan funds, and interest income. Santa Monica Housing Successor Page | 2   III. Ending Balance of LMIHAF: This section provides a statement of the balance in the LMIHAF as of the close of the fiscal year. Any amounts deposited for items listed on the ROPS must be distinguished from the other amounts deposited. At the close of the fiscal year, the ending balance in the LMIHAF was $9,172,829 of which $0 was held for items listed on the ROPS. IV. Description of Expenditures from LMIHAF: This section provides a description of the expenditures made from the LMIHAF during the Fiscal Year. The expenditures are to be categorized. There were $699 in expenditures from the LMIHAF during the fiscal year, for bank fees. V. Statutory Value of Assets Owned by Housing Successor: This section provides the statutory value of real property owned by the Housing Successor, the value of loans and grants receivables, and the sum of these two amounts. Under the Dissolution Law and for purposes of this Report, the “statutory value of real property” means the value of properties formerly held by the former redevelopment agency as listed on the housing asset transfer schedule approved by the Department of Finance as listed in such schedule under Section 34176(a)(2), the value of the properties transferred to the Housing Successor pursuant to Section 34181(f), and the purchase price of property purchased by the Housing Successor. Further, the value of loans and grants receivable is included in the reported assets held in the LMIHAF. The following provides the statutory value of assets owned by the Housing Successor. Statutory Value of Real Property $ 11,635,000 *Value of Loans and Grants Receivable $ 152,797,111 Total Value of Housing Successor Assets $ 164,432,111 *Increase in amount from prior report due to calculation error in prior years corrected in this report VI. Description of Transfers: This section describes transfers, if any, to another housing successor agency made in previous fiscal year(s), including whether the funds are unencumbered and the status of projects, if any, for which the transferred LMIHAF will be used. The sole purpose of the transfers must be for the development of transit priority projects, permanent supportive housing, housing for agricultural employees or special needs housing. The Housing Successor did not make any LMIHAF transfers to other Housing Successor(s) under Section 34176.1(c) (2) during the fiscal year. Santa Monica Housing Successor Page | 3   VII. Project Descriptions: This section describes any project for which the Housing Successor receives or holds property tax revenue pursuant to the ROPS and the status of that project. The Housing Successor does not receive or hold property tax revenue pursuant to the ROPS. VIII. Status of Compliance with Section 33334.16: This section provides a status update on compliance with Section 33334.16 for interests in real property acquired by the former redevelopment agency prior to February 1, 2012. With respect to interests in real property acquired by the former redevelopment agency prior to February 1, 2012, the time periods described in Section 33334.16 shall be deemed to have commenced on the date that the Department of Finance approved the property as a housing asset in the LMIHAF; thus, as to real property acquired by the former redevelopment agency now held by the Housing Successor in the LMIHAF, the Housing Successor must initiate activities consistent with the development of the real property for the purpose for which it was acquired within five years of the date the DOF approved such property as a housing asset. The following provides a status update on the real property or properties housing asset(s) that were acquired prior to February 1, 2012 and compliance with five-year period for initiating development activities: Address of Property Date of Acquisition Deadline to Initiate Development Activity Status of Housing Successor Activity 1725 Ocean Avenue April 11, 2000 October 2, 2018 The Agency transferred title to the City on March 9, 2011, and DOF approved it as a housing asset of the Housing Successor on October 2, 2013. The property has been developed and completed on March 17, 2014, with 160 affordable apartments. 1751 Cloverfield Blvd October 3, 2003 October 2, 2018 The Agency transferred title to the City on March 9, 2011, and DOF approved it as a housing asset of the Housing Successor on October 2, 2013. The property was developed and completed on January 28, 2007 as a congregate housing and Santa Monica Housing Successor Page | 4   emergency shelter, providing 55 beds affordable to persons at or below very-low income. 2018 19th Street June 26, 2009 October 2, 2019 The Agency transferred title to the City on March 9, 2011, and DOF approved it as a housing asset of the Housing Successor on October 2, 2014. The City is the process of considering a sale of the property. If sold, all sales proceeds will be deposited in the LMIHAF. IX. Description of Outstanding Obligations under Section 33413: This section describes the outstanding inclusionary and replacement housing obligations, if any, under Section 33413 that remained outstanding prior to dissolution of the former redevelopment agency as of February 1, 2012 along with the Housing Successor’s progress in meeting those prior obligations, if any, of the former redevelopment agency and how the Housing Successor’s plans to meet unmet obligations, if any. Replacement Housing: The former Redevelopment Agency had one replacement housing obligation that it transferred to the Housing Successor. The outstanding 520 Colorado Avenue replacement housing obligation includes the replacement of the 16 units which were removed. The replacement housing obligation was fulfilled with the construction of 32 new apartments as part of the new housing development at 520 Colorado Avenue, completed in October 21, 2015. Inclusionary/Production Housing: According to the Implementation Plan for the former redevelopment agency, no Section 33413(b) inclusionary/production housing obligations were transferred to the Housing Successor. The former Redevelopment Agency exceeded its total affordable housing production obligation for the ten-year compliance period (fiscal year 2004-05 through fiscal year 2013-14) where 703 units were affordable to very low, low or moderate income households, of which 302 were affordable to very low income households. The former redevelopment agency’s Implementation Plans are posted on the City’s website at: http://www.smgov.net/uploadedFiles/Departments/HED/Housing_and_Redevelopment/R DA/Attach%20A%202009%205%20Yr%20Implementation%20Plan%20-%20FINAL.pdf Santa Monica Housing Successor Page | 5   X. Income Test: This section provides the information required by Section 34176.1(a)(3)(B), or a description of expenditures by income restriction for a five-year period, with the period beginning January 1, 2014 and whether the statutory thresholds have been met. However, reporting of the Income Test is not required until 2019. The Housing Successor expenditures by income restriction for the reporting period thus far are on target to meet the statutory thresholds as required by HSC 34176.1(a)(3)(B). Fiscal Year 2013-14 2014-15 2015-16 2016-17 2017-18 Aggregate Total Units 0 12 0 0 0 12 Extremely Low < or = 30% of AMI 0 226,484 0 0 0 37.5% Very Low < or 50% of AMI 0 377,474 0 0 0 62.5% Low < or = 80% of AMI 0 0 0 0 0 0.0% Moderate < or = 120% AMI 0 0 0 0 0 0.0% Total Expenditures 0 $ 603,958 0 0 0 XI. Senior Housing Test: This section provides the percentage units of deed-restricted rental housing restricted to seniors and assisted individually or jointly by the Housing Successor, its former Redevelopment Agency, and its host jurisdiction within the previous ten years in relation to the aggregate number of units of deed-restricted rental housing assisted individually or jointly by the Housing Successor, its former Redevelopment Agency and its host jurisdiction within the same time period. For this Report the ten-year period reviewed is July 1, 2008 through July 1, 2018. The following provides the Housing Successor’s Senior Housing Test- Reporting requirements for Implementation Plans pursuant to CRL Section 33490 (a)(2)(C)(iv): 68 Assisted Senior Rental Units 697 Total Assisted Rental Units 9.8% Senior Housing Percentage XII. Excess Surplus Test: This section provides the amount of Excess Surplus in the LMIHAF (defined as unencumbered funds exceeding one million or the aggregate amount deposited in the fund over the preceding three fiscal years, whichever is greater), the length of time that the Housing Successor has had excess surplus, and the Housing Successor’s plan for eliminating the excess surplus. At the end of fiscal year 2017-2018 the Excess Surplus in the LMIHAF was $194,821, calculated as follows: Santa Monica Housing Successor Page | 6   Description Amount LMIHAF Balance $9,172,829 Less Encumbrances ($2,527,363) Unencumbered balance $6,645,466 Less the greater of $1,000,000 or the aggregate amount deposited into the account during the housing successor’s preceding four fiscal years, whichever is greater ($6,450,645) Excess Surplus $194,821 The Housing Successor has held the excess surplus for more than one fiscal year and plans on encumbering the excess surplus within the next fiscal year, in compliance with the requirement to encumber excess surplus within three fiscal years. In prior years’ annual reports, the total unencumbered balance in the LMIHAF was incorrectly reported as the excess surplus. This report calculates the excess surplus per the Health and Safety Code definition, which states that “the ‘excess surplus’ shall mean an unencumbered amount in the account that exceeds the greater of one million dollars ($1,000,000) or the aggregate amount deposited into the account during the housing successor’s preceding four fiscal years, whichever is greater”. XIII. Inventory of homeownership units: This section provides an inventory of homeownership units that were assisted by the former Redevelopment Agency or Housing Successor that are subject to covenants or restrictions or to an adopted program that protects the investment of moneys from the LMIHF pursuant to Section 33334.3(f) and includes any losses of units to the portfolio, funds returned to the Housing Successor, and whether an outside entity has been contracted to manage these units. The Housing Successor does not have any homeownership units that were assisted by the former Redevelopment Agency or the Housing Successor.